Gold price have been holding steady above $2,400 recently, buoyed by strong expectations for Federal Reserve rate cuts. This has kept XAU/USD close to a three-day high of nearly $2,430 during Friday’s New York session. Investors are eagerly awaiting the Fed’s next move, which could significantly impact gold’s trajectory.
Current Market Conditions
The Federal Reserve’s upcoming decisions on interest rates are causing much speculation. Traders are divided on whether the Fed will opt for a 50 basis point (bp) cut or a smaller 25 bp reduction. According to the CME FedWatch tool, there’s a 54.5% chance for a 50 bp cut in September. For the entire year, data suggests a total reduction of 100 bps.
In response to these expectations, both the US Dollar (USD) and bond yields have corrected. After an initial boost from lower-than-expected US Initial Jobless Claims for the week ending August 2, the US Dollar Index (DXY) dropped to around 103.15, down from a four-day high of 103.50. Similarly, the 10-year US Treasury yields fell to about 3.97%.
The jobless claims data showed a decrease to 233K, lower than the 240K estimate and the previous 250K (revised from 249K). Despite this, the data has not been enough to change expectations for imminent rate cuts.
Daily Digest: Market Movers
Gold price remain robust above $2,400, driven by anticipated Fed rate cuts and ongoing geopolitical tensions. Recent market turmoil, fueled by concerns over a potential US economic slowdown and rising unemployment, has increased expectations for aggressive rate cuts.
Fed officials have noted that their decisions will focus on economic data rather than market volatility or political pressures. Chicago Fed Bank President Austan Goolsbee emphasized that their priority is maximizing employment and stabilizing prices, not responding to stock market fluctuations.
Geopolitical tensions, particularly in the Middle East, have further enhanced gold’s appeal as a safe-haven asset. Investors are concerned about possible retaliation from Iran following the recent killing of a Hamas leader.
Looking ahead, gold prices will be influenced by the upcoming US Consumer Price Index (CPI) data for July. This report will help determine whether the current market expectations for rate cuts are justified.
Technical Forecast
Gold prices are currently trading within a channel formation on the daily timeframe. While the channel shows a slight upward trend, the overall performance has been sideways for over three months. The 50-day Exponential Moving Average (EMA) near $2,370 continues to support gold prices.
The 14-day Relative Strength Index (RSI) remains in the 40.00-60.00 range, indicating market indecision. A significant breakout above the all-time high of $2,483.75 could push gold into new territory.
Conversely, the upward-sloping trendline at $2,225, drawn from the October 6 low of $1,810.50, represents a key long-term support level.
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